tv [untitled] June 25, 2014 6:00am-6:31am PDT
in a 7.8 earthquake, a 48.2% probability with a magnitude 7 earthquake and over the next 30 years, a 28% risk of both cables being cut. if that happens it could take two to four months to restore service to downtown. that would have severe impacts on businesses and residents in that area. the estimated for a maximum outage, a seven week of a $3 billion hit to local businesses. thinking about the petrero neighborhood, the southern connection, we have focused a lot of our thinking on how to improve that neighborhood.
it's an area that's been used for industrial purposes for quite some time, including power generation for the city. you'll see in yellow the pge ho down yard and in red is the existing open air potrero switch yard. compare that to the small green square on this, which is the proposed new gis enclosed station at the site. this is a view from illinois street of the open air substation, which is something that has typically more industrial kind of neighborhood and of course this neighborhood's trying to transition to something else. so we've negotiated terms for the license agreement that are consistent with the terms that you adopted and that the board of supervisors endorsed with the term sheet. most of the land over 400,000
square feet of the land is submerged land. there's about 50,000 square feet of underground land that's the hdt drilling areas and just 21,000 square feet of lands along 23rd street that's mainly for sidewalk use. pge would pay the port prepaid rent for a 40 year term of approximately $7.6 million per installment for a total of $15.2 million. we'd receive the first payment on the effective date of the license, sometime after the board of supervisors approves the license and received the second payment before january 1, 2015. there is contemplated that pge option for 26 years after the first 40 year term rent for that period would be determined by an appraisal process,
subject to baseball arbitration, security deposits, but refundable in this case because they're prepaying all of their rent obligations under the agreement. and environmental security including our standard $10,000 environmental oversight deposit and robust $6 million letter of credit, 5 of which could go away after construction is complete and environmental sampling data is submitted to water board. installation of the cable along the bay floor does create some limitations on port use in this area. it's not an area we've dredged in the past. we spent a lot of time talking with maritime division about the depths of the bay, and they do not dredge in these areas so as part of this license we
would be limited from penetrating the bay mud in the area of the cable project or permitting lateral crossings. in the area north of piers 30, 32, we'd have to get pge's permission to install piles along the pier to enable maritime uses. we do contemplate in the license agreement situations where the city and port would have to construct a major project and [inaudible] removal or relocation of the [inaudible] 1 line, but only after we jointly look at whether there's a way to design the city's project in a way that could avoid that relocation. and then i'm going to go into a little bit more detail, condition of the liensz is that they actually screen or enclose
theotrero based on pge's benefit out of the project is $4.2 million based on the actual cost of the equipment. separate and apart from the license agreement there's an option to acquire the ho down yard, which is this 3 acre site adjacent to pier 70. the port is not involved in this transaction. this is a benefit that's being conferred to the city. the department of real estate would have this option to acquire the site at a following the accidented price of $8.3
million based on appraisal. ixed price of $8.3 million based on appraisal. and this option contemplates that the excess value or the value of the approved lands value of the ho down yard would go to the potrero terrace and annex hope project. pge was quite worried about the environmental conditions of the ho down yard and how that liability would be dealt with. i think we've had an effective negotiation with them. the city will not own any of the liability. that was made very clear at the board of supervisors. the department of real estate would find a third-party buyer who would clean up the fairly minimal contamination at the site and indemnify and hold
harm he is pge for any future use of the site and that future owner would have to follow certain risk management and controls on the site to enable new uses wlshgs residential or office. this is a closer up view of the ho down yard right along 23rd street. it will be the gateway to the pier 70 project. our currentst mate of the improved land value of rezoning that site from industrial to residential or office is north of $20 million. real estate in this area of the city is really hot. so as to the water front community benefit package, we think we have a very strong package through this deal. 8% of the prepaid rents would go into the benefit funds, that's $1.2 million. we will realize screening or
enclosure of the potrero switch yard, subject to required approvals. relocation of the ho down yard industrial use, sidewalk improvements along 23rd street. pge has negotiated local hire and work force agreement with the office and work force development including the use of local residents for 30% of the labor positions. and i talked already about the city option to acquire the ho down yard and those proceeds that would go to the public housing project. here are some options for screening. the potrero switch yard, either screening or enclosed substation. and just in closing, we think these changes, the screening of the switch yard, relocation of ho down yard are a vital step
of pier 70 and being able to bring in that private investment from forest city. there are a few other approvals that are required for the project, bcdc and the water board and army core of engineers will have to sign off. the project schedule is coming right up. pge wants to start construction on land off of port property in august. off shore cable laying would happen june of 2015 and the cable would be in service, april of 2016. so if the commission approves the license agreement, the next step would be for port staff to submit the resolution approving the license and resolution approving the option agreement to the board of supervisors for their consideration. thank you very much and available to answer any questions. >> motion and second. >> so moved.
>> second. >> any public comment? commissioners comment? >> i guess i just want to i guess understand. i mean, the two transactions -- the last time i heard, did we have [inaudible] the ho down yard or was it always envisioned the city would always take over. >> that's a good question. in 2012 the option to acquire the ho down yard was an option that would come to the port. >> okay. >> we did some thinking about that and i think made the ultimate determination that it was not appropriate for the port as a public trustee to be in the business of acquiring public property for private development. >> that's understandable. so you're presenting it as part of the transaction because pge's involved in both in terms
of cable and potential option, but they really are separate transactions? >> yes. >> pge's involvement is the common thread? >> yes. >> and we're really just voting on the license and that alone by itself. >> that's absolutely correct. i'm just presenting it as information because it's part of this overall package. >> but when the board of supervisors, they'll look at both anyways, more of a broader exposure for them to look at both relevant to the city. >> yes. >> okay. i think i don't really have any questions. i think this is more just detail from what you've been building in the past. >> commissioner brandon. >> thank you. that was a great presentation. i think you've done a wonderful job and great community benefits and a great lease for the port overall. i was just wanting to know, do you know what pge is planning
on doing with their existing switch yard in the big red box? >> that's the one that -- under this agreement -- actually under the port license, the city has the ability to say to pge to we'd like you to screen that or enclose it in a building and we're going to be consulting with the planning department on that issue to get their view. i think the early sense is that the city's preference would be to enclose it in a building rather than leave it as an open air station because i think that deals with both the aesthetic issues and sound issues. these open air sound stations tend to emit a buzzing sound that discourages development around them. we don't know whether or not cpuc would approve the sort of rate package to enclose that
station, but we would issue our preference, pge would have to go through a process and use commercially reasonable efforts to obtain the rate funding and regulatory approvals to make that change. if we're successful if that, that would be a dramatic change in this neighborhood. >> yeah, that would be wonderful. and then the $1.2 million, is that [inaudible] once the two payments are paid or is it done over time or -- >> i think it would be a percent of each payment, so approximately $600,000, one on the effective date around august, september, and the other would come before january 1, 2015. >> have we decided what we're going to do with the $15 million? >> that's subject to your
appropriation decision as far as annual budget and we have not have staff discussions. >> [inaudible] budget. i think it would be a separate -- elaine was still here, but i think that would be a separate supplemental and on the revenue and the expense side so -- >> even in the recent budget submission it was not reflected. >> the budget submission that we submitted back in february, no. and we did not amend a budget going forward, i don't believe, to take that into account. >> it's not reflected in the budget. >> i assume when we go to the board there will be a supplemental appropriation. >> or -- that's a good question. if there's a desire to spend it in the next two year -- because we've just had the approval of a two year budget and if there's a desire to spend it
there would need to be a supplement appropriation. >> the question is, would you allocate more to capital? what i was going to request is if we can have a certain amount of it designated for the [inaudible] water front, maybe the piling, removal or other infrastructure needs in the southern water front. >> certainly, yeah. you're both right. if it flows through the water fall funds through revenues, which it will, then the 15% designation to reserves. where we get that cash can be completely separate from this particular cash, but it will flow through and trigger both those policies. as you know, commissioner brandon, when we get an accumulation of funds, we try to program them for for
beautify case for the plan we showed you last meeting. >> excellent. i just wanted to thank all the other folks who have worked on this. carol bach has provided invaluable advice on these environmental risk issues and help review the license. [inaudible] has been phenomenal to work with in terms of negotiating the license and joanne is lead on the purchase and sail agreement which are unusual document so we have a great team at the port working on these complex deals. >> thank you. >> commissioner brandon, anymore thoughts? >> no. i mean, i want to thank you. i think this has been a long time in the making and it's nice to see it's getting down to the final yard line. >> thank you brad, you and your team. i want to thank my two fellow
commissioners for their thorough input in this deliberation. >> finally, ontario smith has been a great negotiating partner in helping figure out all the difficult ins and outs. sorry for my repeated interruptions. >> thank you very much. resolution number 1443, all in favor say i. >> i. >> opposed. resolution number 1443 passes as passed. [laughter] next item. >> item 13, new business. >> commissioners, i don't think i heard any new business today. we talked a little bit about some existing new business from the real estate presentation, but i didn't hear anything else that was new business. >> i have a very long list from previous meetings so don't feel
compelled to come up with anything. >> i don't know if this is new business, but i want to know if there is some way that we can help the bar pilots with their recruitment and hiring. >> okay. >> if there's something we can do -- >> we will continue to explore that. not to -- given that it's not [inaudible]. >> i think a couple meetings ago, commissioner woo ho brought up about pier 3032 so you'll be coming back to us on that, things you said you and the staff [inaudible]. >> yes. yeah, as soon as we know something we'll be right back, as we know there's a lot of anxiety about it. 3032 and [inaudible].